Legal framework
Article 157 TFEU enshrines the principle of equal pay for men and women for equal work or work of equal value directly in EU law. In this context, external managing directors are considered employees and are therefore subject to the EU equal pay requirement.
The Remuneration Transparency Act (EntgTranspG) specifies this principle in German law and focuses on the actual, job-related requirements. If lower remuneration is paid for equal or equivalent work, Section 22 AGG presumes that the difference in remuneration is gender-based; the employer then bears the full burden of proof for objective, gender-neutral reasons that justify the difference in salary.
The case
In May 2020, a limited liability company (GmbH) concluded two managing director employment contracts: one with the plaintiff, a social scientist who had been working for the GmbH since 2002, and one with an externally recruited political scientist and business economist. The contracts were identical in content, with one exception: the plaintiff received a basic annual salary of €150,000, while the male managing director received €180,000. The distribution of responsibilities decided upon later assigned the plaintiff the areas of construction and environment, human resources, IT, legal affairs and in-house consulting; the other managing director was responsible for social security, digital administration, marketing and finance/controlling. The plaintiff was responsible for 124 employees and around 17% of total turnover, while her colleague was responsible for 308 employees and around 83% of turnover. After her contract was terminated, she claimed a total gross remuneration difference of €143,155.36.
The decision of the Bochum Regional Court
The Bochum Regional Court upheld the majority of the claim and affirmed the equivalence of the activities. The objective requirements of the position were decisive: identical contracts, equal legal powers and mutual representation. The different degrees were not decisive, as the job advertisement only required a university degree without any specific subject requirements. Although the court recognised that a managing director had more employees and a higher share of turnover, it considered this to be a typical structural asymmetry in companies. Even areas with lower turnover or fewer employees can be indispensable to the overall operation and are therefore to be regarded as equivalent work within the meaning of the EntgTranspG.
Presumption of causality not refuted
Since the claimant received lower remuneration for equivalent work, the legal presumption of gender-based discrimination under Section 22 AGG applied. The defendant was unable to refute this. Neither the different fields of study nor the external origin and management experience of the male managing director were sufficient, especially since the plaintiff had many years of operational knowledge and internal expertise. It was particularly critical that the distribution of responsibilities, which was used to justify the salary difference retrospectively, was only decided by the supervisory board months after the contract was concluded. The court considered this to be an indication that the original salary difference was not based on objective, job-related considerations.
Relevance for practice
The ruling has direct implications for remuneration structures at management level, particularly with regard to the implementation of the Pay Transparency Directive. Companies should bear three points in mind:
- Review remuneration structures
Pay differences between managers of different genders are not inadmissible per se, but must be based on objective, documented and job-related reasons. Subjective assessments of business areas or blanket market comparisons are not sufficient. - Link job advertisements to salary
If the job advertisement only requires a general university degree, a subsequent pay difference cannot be justified by a specialised qualification that was never officially required. The job profile and salary structure must be consistent. - Ensure consistency over time
Remuneration decisions must be objectively justified and documented at the time the contract is concluded. Subsequent organisational decisions or distributions of business are only suitable for retrospective justification to a very limited extent and, in the event of a dispute, are more likely to work against the employer.
What we can do for you
We support companies in the legally compliant design of remuneration structures at all hierarchical levels: from the analysis of existing pay differences to the development of transparent salary systems and the implementation of appropriate governance processes. If you have any questions about this ruling or your individual need for action, please do not hesitate to contact us.
Conclusion
- Equal pay also applies to external managing directors; differences in remuneration must be objectively justified, job-related and comprehensible at the time the contract is concluded.
- If the legal presumption of causality cannot be refuted, there is a liability to pay the entire salary difference retroactively.
- Remuneration decisions should be consistent in terms of content and timing with job advertisements, requirement profiles and internal governance decisions.
